The runaway delayArnold's legislation to be revisited next yearBy DAVE MCNARY

In a blow to Gov. Arnold Schwarzenegger, California's pending runaway production legislation has been delayed until next year at the earliest.

Faced with opposition from watchdog tax groups and the Friday expiration of the State Legislature's current session, backers of Assembly Bill 777 have secured an agreement with Schwarzenegger to include the bill's language in the governor's proposed 2006-07 budget, to be presented in early January.

Richard Stapler, a spokesman for Assembly Speaker Fabian Nunez, told Daily Variety the delay will enable supporters of the legislation to offer a more clarity about the bill's benefits.

"By January, we'll have more certainty about state tax receipts and a better picture of the state's financial picture," he added.

The initial scenario for AB 777 appeared promising, with Schwarzenegger aligning with Democrats Nunez and State Sen. Kevin Murray along with Hollywood labor unions. After approval by the Assembly in June, the bill was headed for a hearing in the Senate Revenue and Taxation committee, but that event was never held as opposition emerged from watchdog tax groups.

Prospects for the bill may have been dampened by the governor's declining poll numbers and rising dissatisfaction over his scheduling a special election in November. A Field poll released Wednesday showed 56% of California voters say they are inclined to oppose the governor's second term, while 36% say they're inclined to support it.

AB 777 would have allocated as much as $100 million annually over 10 years in refundable tax credits to producers who shoot in California. Goal was to level the playing field by allowing California to compete for projects that have been lured via incentives to states such as Louisiana and New York and thus retain a signature industry, preserve high-paying jobs and boost tax revenues.

Bill would have provided 12% credits for wages and equipment with a cap of $3 million per production if 75% of the project was shot in California. Producers of TV movies could have received as much as a 15% credit.

But opponents characterized the legislation as a handout to some of California's wealthiest residents at a time when core services are facing cuts due to massive budget deficits. Those groups also contended that the bill could lead to the state paying out millions on productions that either have no taxable income or would have been shot in California without incentives.